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Sports nutrition products maker is a momentum and M&A trade
Thursday 02 Feb 2017 Author: James Crux

Pocket sports nutrition products manufacturer Science in Sport (SIS:AIM) ahead of next month’s (23 Mar) full year results statement, where a positive outlook could give the shares another energy boost.

With revenues sprinting higher and awareness of its ‘SiS’ brand growing in a $10bn global sports nutrition market, Shares expects news flow to remain positive and believes a premium priced takeover bid shouldn’t be ruled out.


Going for gold

Hatton-headquartered Science in Sport makes and markets sports nutrition products for pro athletes and amateurs alike. Its science-backed SiS brand of energy powers, isotonic gels, energy bars and protein-based recovery powders has growing traction with elite athletes.

In the 2016 Rio Olympics, 34 medal-winning teams or athletes used its products, up from 24 in 2012 – Science in Sport’s rigorous approach to preventing banned substances from entering its supply chain only engenders trust.

The official sports nutrition supplier to professional cycling teams Team SKY, British Cycling and to USA Cycling, Science in Sport is also the official sports nutrition partner to Liverpool FC. Olympians Sir Chris Hoy MBE and Katarina Johnson Thompson are Brand Ambassadors, while Mark Cavendish is an Elite Sports Consultant to the brand.

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Fighting fit

The £36.4m cap operates in a resilient market driven by the burgeoning popularity of endurance sports. Encouragingly, Science in Sport has positive news flow momentum at its heels.

A pre-close trading update (5 Jan) highlighted 30% sales growth to £12.24m in the full year to December, direct sales via doubled year-on-year. Moon also flagged ‘healthy distribution gains’ with independent retailers and ‘robust growth’ with supermarkets and via third party online retailers.

International markets are a key focus. Science in Sport’s new Australian operation is performing ahead of expectations and the US and Italy are very much a focus for 2017. Sterling depreciation represents a headwind in terms of sourcing costs, yet gross margins reportedly improved in the final quarter as production efficiencies at the Nelson factor ‘reached new highs’ during 2016.

Admittedly, Science in Sport remains loss-making as it invests for growth. It also has a strong balance sheet and improving gross margins indicate management control of costs.

This is enabling the investment in marketing necessary to underpin the prospects of a brand and expanding product portfolio sure to be on the radar of deep-pocketed suitors. Industry M&A activity has been strong, with high-profile acquirers in the sector including GlaxoSmithKline (GSK) and larger nutrition peer Glanbia (GLB).

Science in Sport has top line momentum and we’re staying positive on the micro cap at 83.26p. (JC)

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